The Facts
In a recent dispute the alleged infringer has responded by bringing anaction for a declaration that its actions do not infringe the intellectualproperty in issue.
Acushnet –TITLEIST
Acushnet Holdings Corporation (“Acushnet”) is a global leader in thedesign, development, manufacture and distribution of golf products. Acushnet owns the TITLEIST brand name used inassociation with golf equipment including golf balls and the FOOTJOY brand usedin association with performance wear.
Acushnet has diligently protected the technology used relating itsproducts and holds more than 1,200 U.S. patents. Acushnet has also been diligent in using itsportfolio of patents, trademarks and trade secrets to prevent alleged unauthorizeduse of its intellectual property and has devoted substantial resources to doingso. It has effectively stopped allegedlyinfringing activities in the marketplace through the use of this strategy.
Costco -Kirkland
Costco Wholesale Corporation (“Costco”) is a large and successfulcompany. Part of its business modelincludes finding savings on quality goods for its members. Its mission statement provides that it will“continually provide our members with quality goods and services at the lowestpossible prices”.
In October 2016 Costco introduced the KIRKLAND brand golf ball in theU.S. which was then priced at $15 for a dozen. The ball was of a high tech construction and consisted of a four-pieceball with a urethane cover which puts it in the high end category for golf balls. The ball’s popularity was immediate as itsperformance was very strong. The ballwas so popular that it disappeared within months. Similar golf balls from other competitors inthe U.S. typically sell for $50 a dozen.
As a result of these events, Acushnet caused a letter to be sent toCostco asserting that Costco was infringing eleven Acushnet patents through thesale of the KIRKLAND brand golf ball as well as engaging in false advertisingbased on a product guarantee that all KIRKLAND products “meet or exceed thequality standards of leading national brands”.
The Action
In response to the demands, Costco instituted an action seeking adeclaratory judgment that it is not infringing any patent rights owned byAcushnet and that it is not engaged in any false advertising. The statement of claim makes reference to theeleven patents relied upon by Acushnet and alleges that Costco does notinfringe any valid claims or that the patents are invalid.
With respect to the assertion of false advertising, Costco says thatit has never publically compared its golf ball with any Acushnet ball includingTITLEIST PRO VI golf ball. In addition,to the extent that the guarantee can be interpreted as comparative, Costco saysthat is true. They state that manyindividual golfers and golf ball testers and experts have used or tested theirproduct and concluded that it was, at least comparable, to golf balls sold byleading national brands, including Acushnet.
Comment
Bringing an action for a declaration of non-infringement is relativelycommon in the U.S. By proceeding in thisfashion it accelerates the process of determining whether infringement hasoccurred and gives the plaintiff the advantages associated with choosing acourt of its liking. In this case, theproceedings are in the United States District Court in the Western District ofWashington at Seattle. Costco’s headoffice is also located at Seattle area.
Commentators have questioned whether the strategy is a good one. Costco has certainly called Acushnet’s bluffbut Acushnet is committed to bringing actions for patent infringement relatingto its technology. The litigation willbe expensive since there will be significant complexities caused by litigatingwith respect to eleven patents.
Bringing an action for a declaration of non-infringement is lesscommon in Canada although it is possible to do so. It remains to be seen how effective such astrategy is. See our previous commentlocated here.
John McKeown
Goldman Sloan Nash& Haber LLP
480 UniversityAvenue, Suite 1600
Toronto, OntarioM5G 1V2
Direct Line: (416)597-3371
Fax: (416) 597-3370
Email: mckeown@gsnh.com
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